Can A Central Bank Run Out Of Money?
Central bank loses 18% of GDP. Here’s why you’ll own nothing:
The Swiss National Bank (SNB) posted its largest loss in 116 years – $143B. In GDP terms, that’s 18% of the Swiss economy.
Most of the loss stems from last year’s collapse in equities, which made up 25% of the SNB’s Q3-2022 balance sheet.
Yep, the SNB is sitting on a bunch of stocks that turned bad.
Well, we don’t know exactly because the SNB doesn’t like to disclose that…
But as an institutional investment manager, the SNB has to submit a quarterly 13F form with the SEC – just like any ordinary hedge fund.
That’s how we know that its largest holdings include Apple, Amazon, Microsoft, and Tesla.
Ok, so just basic degen stuff.
But why is a central bank YOLOing the market?
That’s a great question.
The Swiss economy is vibrant and its products in high demand internationally. That means a strong Swiss Franc (CHF) – the domestic currency those popular goods are denominated in.
So what does the SNB do?
It debases the currency under the pretext of protecting Switzerland’s export business.
However, the SNB has to keep pace with the rapid money printing of Switzerland’s main trading partners to remain competitive.
Let’s pause here for a second.
No matter how productive and hard-working the Swiss people become, the SNB feels compelled to offset a rising CHF.
It will therefore print CHF and bring it into circulation by trading it for desirable assets like stocks and gold.
This means the SNB is one of the world’s largest hedge funds, and it’s margin account for collateral calls is the Swiss economy.
In other words, the reward for the Swiss people’s ingenuity and industriousness is to have the fruits of their labor siphoned off and used to fatten the SNB’s expanding balance sheet.
It’s the definition of a hamster wheel.
Other countries do this as well, usually through sovereign wealth funds which are used to launder the ever-inflating money supply.
They’ll go out to market and buy real estate, companies, commodities, sovereign debt, etc.
That’s right, you’re competing for scarce assets with entities that have access to an infinite money printer.
Good luck saving for retirement.
You’ll own nothing, and you’d better like it.
Written by Andrew Axelrod
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